A Tax-Free Savings Account (TFSA) is a personal savings account that can be used to save for any goal. After-tax money can go into a TFSA, but your investments grow tax-free and you won’t pay any tax on withdrawal. With a TFSA you can have access to your money at any time and still allow money to grow.
Who should invest in a TFSA?
Canadians who have reached the age of majority
Great for short term, medium-term, and long-term savings
Best suited for low to medium-income earners or as a complement to an RRSP
Benefits include:
Earn investment income, tax-free
Interest, capital gains, dividends you earn in the account are not subject to tax
Flexibility to withdraw from TFSA
Withdrawals are tax-free and can be at any time, for any purpose that you choose
Flexible savings plan
Any unused contribution room in TFSA can be carried forward
Any withdrawals from a TFSA in one year, can be re-contributed in the next calendar year
Government benefits stay the same
Withdrawing from a TFSA and receiving any amount will not affect the government benefits you get (ex. Child tax benefit, GIS, etc.)
Current contribution limit per year is $6,000 as of 2021 and $75,500 if at least 18 years old in 2009 and never contributed to a TFSA. If you withdraw funds out of your TFSA, that contribution room becomes available again the following year.
One of the best ways you can start to save is by setting up a monthly Pre-Authorized Debit into your TFSA from your bank account. Whether that is 100$/month or 500$/month - it will slowly build up your TFSA over time and you will be surprised by the amount of growth you will see.
Contact us today to let us help you decide what kind of investments you should be thinking for your TFSA.